The US economy and the global financial system appear to be better able to absorb unanticipated economic shocks, said Federal Reserve board chairman Alan Greenspan.
"Despite the draining impact of a loss of eight trillion dollars of stock market wealth, a sharp contraction in capital investment and, of course, the tragic events of September 11th, 2001, our economy is still growing," Greenspan said in a speech prepared for delivery to the Council of Foreign Relations.
"Importantly, despite significant losses, no major US financial institution has been driven to default. Similar observations pertain to much of the rest of the world but to a somewhat lesser extent than to the US," he said.
Greenspan cautioned that the "recent weakened pace of world economic activity" has raised concerns that the full boom and bust cycle of the past decade is not over.
"But the already clearly evident increased resiliency arguably supports the view that the world economy already has become more flexible irrespective of how events unfold in the weeks and months ahead," he added.
The growth of financial derivatives has played a major role in the "favorable turn of events," he said.
"These increasingly complex financial instruments have especially contributed, particularly over the past couple of stressful years, to the development of a more flexible, efficient, and resilient financial system than existed just a quarter-century ago," he said.